Five-year plans seem to come every year at Harley-Davidson,
if not more often. It recently unveiled its third road map for the future in two years
By Rich Duprey
Five-year plans seem to come every year at Harley-Davidson (NYSE:HOG), if not more often. It recently unveiled its third road map for the future in two years, changing from More Roads to Harley-Davidson to The Rewire to The Hardwire.At the risk of getting our wires crossed, let’s look at what we know of these plans so far and where they can take the motorcycle company tomorrow.
It seems clear that CEO Jochen Zeitz is mostly rejecting the path his predecessor Matt Levatich took. The More Roads plan envisioned a company making 100 new models in 10 years, many of which would be used to attract more women and urban riders, while also expanding its international reach. It was an ambitious plan to reverse a five-year slide in sales, but one that Zeitz says was much too complex to be practical. During Harley’s earnings conference call last month, he said: Complexity needed to be dramatically reduced. Goals set needed to be achievable and realistic. Our strategy had to be refocused to better align with our capacity and capabilities and also our new reality, focusing on what makes a difference and nothing else.
The new Harley-Davidson will be a leaner, more agile organization that focuses on its strengths, not on lofty visions.
A much narrower lineup
Zeitz’s comments on complexity seem to jettison the 100-model goal as he put a finer point on it by saying Harley-Davidson will be “streamlining” its lineup by 30% with the goal of refining it even further. Which models remain will be revealed later, but Zeitz hinted the new Bronx Streetfighter model may be out while the Pan America adventure touring bike is definitely in. Adventure touring is one of Harley’s “new high-value segments,” Zeitz said, but when pointedly asked whether the Bronx is still on schedule for next year, he demurred, saying: “At this point, adventure touring will be the focus going into next year … Other product-line-related decisions, we will be revealing in real time, so it’s not really something we can and want to talk about at this point.” It’s an interesting choice because the Bronx model seems much more in keeping with Harley’s heritage while the Pan America is a completely new direction, albeit one with a lot of promise. And the fate of the LiveWire and other electric motorcycles is also up in the air as they were not mentioned at all.
Staying closer to home
Harley-Davidson isn’t abandoning international markets, since the plan is to target 50 of its top markets even as it exits others that provide little value to the brand. Yet where the U.S. seemed to have also-ran status under More Roads, the Rewire and Hardwire plans restore it to prominence. Whether that means Harley plans to still develop a small-displacement motorcycle for the Asian market with Chinese bike maker Qianjiang is also unclear. Zeitz avoided answering whether that was the case, saying, “whether and when we are going to launch specific product is not something that I would like to elaborate on right now.” But parts of Asia are still included in its narrower international target.
A smaller company
The decision to fire 700 employees in June was made under the Rewire plan, which guides the company until the end of the year, but the desire to reduce costs while eliminating duplication and inefficiency will be the hallmark of the Hardwire plan. “Every function, region, and country has rebuilt its organization from the ground up to focus on what is essential and valuable.” Zeitz said. “We’re simplifying interactions and processes, scrutinizing spend in categories large and small, and eliminating activities that are not essential.” Dealer motorcycle inventory at the end of the second quarter was down some 17,000 bikes, or about 32% from the year-ago period, due to factories being closed because of the pandemic. Although that was much lighter than what Harley wants, dealers likely won’t be carrying the same level they had been.
Much left unsaid
While the middle-aged male has been faulted for Harley’s decline as he’s aged out of the market, he’s also the one still buying its motorcycles, and Zeitz sees him as an opportunity: “I would say consumers are aging into riding as they have more free time and resources, especially post this pandemic. Harley-Davidson is really more about attitude and emotion than age and demographics.” To appeal to new customers, though, it will launch new marketing campaigns centered around influencers, such as its first effort featuring Aquaman actor Jason Momoa.
Like so much else surrounding Harley-Davidson and its road maps, there remains much we don’t know. So whether any of these initiatives put the bike maker back on track or have it veer further off the road remains to be seen.